An arrangement is to receive something, typically a publication, regularly by paying in advance. Pay in advance to join an organisation or media house and enjoy their facilities The definition of a subscription is an agreement you make in advance to receive something for a specific period of time. When you make an arrangement to have a magazine delivered every month, this is an example of a subscription.
There are various services that you can pay for online as they become available
A subscription is an amount of money that you pay regularly in order to belong to an organization, to help a charity or campaign, or to receive copies of a magazine or newspaper. You can become a member by paying the yearly subscription.
For businesses with a product or service that can be offered over time, subscription payments are a quick and reliable way to retain customers and create consistent income. Establishing a long-term buyer commitment can help merchants maintain a customer base, while consumers enjoy the ease of bill payment that subscription payments can provide.
1. What are subscription or recurring payments?
Subscription payments, or recurring payments, are repeated transactions that are scheduled on a regular basis. Any time a consumer has a continued service or product purchase, they may opt for a subscription or recurring payment plan. Once a buyer inputs their preferred payment, the merchant will use this information to charge the customer and deliver goods each cycle. In short, a subscription payment is a scheduled money transfer that happens automatically.
2. How do subscription payment systems work?
The recurring payment process is fairly straightforward. A customer chooses to sign up for a subscription online and complete a form with payment information, which is stored with the merchant. After that first input, the consumer never has to enter their information again, the merchant has it in their records. If a buyer would like to make an additional one-time purchase from the merchant at a later date, their information is still on file, which makes the closing process simple for both parties.
Recurring payments may work differently for various businesses. For a service-based subscription, the payment is typically posted the same day each month. Once the bank or credit information is entered, that information is on file with the supplier. Each month, or cycle, that account is automatically charged. For some services, the payment might fluctuate, for example with an electricity bill that is billed by usage. Though the amount changes, this is still a subscription payment because it has been set up to withdraw from an account each pay period.
3. What products and services use subscription payment systems?
Recurring payments can be applied to utilities, as mentioned above, or for memberships and activities like the gym or an organization, or entertainment like magazines or streaming TV accounts. Office supplies and even pet supplies can be set up for automatic deliveries. These all fall under the subscription payment umbrella. Even e-books can be set up on a loan service for a fee.
One-time purchases are not recurring payments, nor are instalments due to their singular purchase, even though payment happens over time. Subscription payments are long-term and not limited to a singular product or service date.
4. What are the benefits of the subscription payment system?
Perhaps the biggest reason a merchant would activate a subscription payment system is to bring in consistent income. Businesses that sell goods and services have an unreliable and inconsistent money flow that can hamper profitability. With recurring payments, revenue is guaranteed each month, which can help better assess finances and growth. It also adds stability to the business, and may even allow investments to increase capabilities.
Recurring payments are beneficial when it comes to establishing a clientele, too. Consistent use of a product instills a sense of loyalty and a consumer is not only likely to stay with a company when they have a subscription payment set up, they will often increase their business or make additional one-time purchases with that merchant. It’s up to the business to continue to deliver a high-quality experience to keep their subscription base steady. A company that provides a good product on a regular basis will likely continue to maintain business and grow the consumer value using a subscription payment model.
Indeed – the customer experience is paramount, especially in e-commerce in which there’s no human interaction. A good way to maintain a satisfied customer base is to establish automatic payments. This system enables customers to walk away from the purchasing process entirely. The ease of automation is incredibly valuable in the digital age. The less a consumer needs to do, the better their experience. It’s a great boon for the merchant, too, as with automatic payments a date is typically set with the payment amount, which can help manage business income more efficiently.
5. How do you set up a subscription payment system?
Companies looking to integrate a payment system have options. One is to initiate an in-house platform that handles the accounting. This requires a technology team to both create and maintain the system, and an accounting team to handle the payments and ensure accuracy and timeliness. Big box retailers use this type of internal system, as do magazines and newspapers.
This kind of set up is expensive and involved, however, so many companies choose to use a third-party payment service. These entities are useful and have platforms buyers are already familiar with, which amplifies that valuable customer experience.
6. How to pick a subscription payment service that's best for your business
Selecting a payment service shouldn’t be difficult, but there are various methods to choose from. Many go with a provider option like Stripe, PayPal, or Google Checkout that manages the payment process, but also expands to more solutions like business accounts and payouts. Both of these options also take one-time payments.
Companies can go with a platform that focuses strictly on subscription payments, like ChargeOver Ordergroove and Recurly, which offer analytics and partnership options. Small online businesses often choose Shopify and BigCommerce that’s made to cater to the needs of an independent and growing operation.
7. The future of subscription payments
Because of the benefits that recurring payments give both merchants and consumers, more and more companies are reconfiguring their business platforms to include a subscription-based option.
The sector is poised to grow as the need rises and digital online sales escalate. Particularly in today’s environment, businesses will need to adjust their strategies to morph with consumer habits and stay on top of the curve.